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Establish Control Requirements and Related Procedures' which was 
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United States General Accounting Office: 
Washington, DC 20548: 

July 26, 2002: 

Mr. William E. Kelley: 
National Director: 
Congressional Award Foundation: 

Subject: Congressional Award Foundation: Management Action Needed to
Establish Control Requirements and Related Procedures: 

Dear Mr. Kelley: 

In May 2002, we issued our report [Footnote 1] expressing an opinion on 
the Congressional Award Foundation’s fiscal year 2001 and 2000 
financial statements and on management’s assertions regarding the 
foundation’s internal controls as of September 30, 2001. We also 
reported on the results of our tests of the foundation’s compliance 
with selected provisions of laws and regulations during fiscal year 

The purpose of this report is to advise you of additional matters 
identified during our fiscal year 2001 audit regarding accounting 
procedures and internal control weaknesses, and to recommend 
improvements to address these weaknesses. These matters are not 
considered material in relation to the financial statements; however,
they warrant management’s consideration. 

Results in Brief: 

The Congressional Award Foundation has several internal control 
weaknesses related to processing transactions, maintaining supporting 
documents, and required reporting. Specifically, we found the 

* lack of approval for payments to vendors; 

* inaccurate classification of transactions in the general ledger; 

* lack of supporting documents for adjusting journal entries made by the
foundation’s accounting firm; 

* incomplete personnel files, and; 

* lack of annual reporting to the Congress for fiscal year 2000. 

The leadership of the Congressional Award Foundation changed near the 
end of fiscal year 2001, and this transition may have contributed to 
the control weaknesses we found during our audit. Since this 
transition, the foundation has established the executive position of 
the Director of Finance and Administration to oversee daily financial 
and administrative operations. The Director of Finance and 
Administration has told us that he is addressing the weaknesses we 
noted during our audit. 

The foundation agreed with our findings and recommendations. We will 
follow up on these matters during our audit of the fiscal year 2002 
financial statements. 

Scope and Methodology: 

As part of our financial statement audit of the Congressional Award 
Foundation, we obtained an understanding of the foundation’s internal 
control related to the recording and processing of transactions and we 
tested compliance with selected provisions of the Congressional Award 
Act, as amended. In conducting this part of our audit, we interviewed 
key foundation staff members, reviewed applicable policies and 
procedures, and examined relevant documents and records. In conducting 
the audit, we also tested relevant internal control over financial 
reporting, including the safeguarding of assets. 

We did not evaluate internal controls relevant to operating objectives, 
such as controls relevant to ensuring efficient operations. We limited 
our internal control testing to controls over financial reporting and 
compliance. Because of inherent limitations in internal control, 
misstatements due to error or fraud, losses, or noncompliance may 
nevertheless occur and not be detected. We also caution that projecting 
our evaluation to future periods is subject to the risk that controls 
may become inadequate because of changes in conditions or that the 
degree of compliance with controls may deteriorate. 

We conducted our audit pursuant to the Congressional Award Act, as 
amended (2 U.S.C. 807), and in accordance with U.S. generally accepted 
government auditing standards. Our work was performed from January 2002 
through April 12, 2002. We received comments on a draft of this report 
from the foundation’s Director of Finance and Administration and 
incorporated his comments regarding actions under way and planned 
within the relevant sections of this report. 

Lack of Approval for Payments to Vendors: 

During our fiscal year 2001 audit, we found that for 7 of the 68 
sampled transactions the foundation’s supporting records did not 
clearly document approval of payments to vendors. The foundation’s 
financial policy requires that all payments be reviewed and approved by 
an executive officer of the foundation and that all checks over $2,500 
have a secondary approval by the National Director. Without clear 
review and approval of payments, the foundation increases the risk of 
payment errors. 

The Director of Finance and Administration informed us that he is 
planning to implement the use of a check request form that will clearly 
document approval of payments. Those who submit requests for payments 
will be required to use this form, which will contain a description of 
the goods or services requested and supporting documents. This will 
provide management with a formal method of review and approval for 
payment to vendors. If properly implemented and applied, we agree that
the use of this form as standard procedure for approval of payment will 
address the problem we noted with a lack of clearly documented 

Inaccurate Classification of Transactions in the General Ledger: 

As a result of our testing of expense transactions in fiscal year 2001, 
we found that 5 of the 68 sampled transactions were misclassified in 
the general ledger. Staff who were not trained in accounting posted 
these transactions, and the postings were not reviewed or monitored by 
a supervisor. After discussion with the Director of Finance and 
Administration, it was agreed that three of these transactions affected 
the accuracy of certain expense items and should be reclassified to 
ensure the accuracy of the financial statements. 

GAO’s Standards for Internal Control in the Federal Government 
[Footnote 2] requires that in the management of human capital, 
“management should ensure that skill needs are continually assessed” 
and “training should be aimed at developing and retaining employee 
skill levels to meet changing organizational needs.” Finally, it states,
“qualified and continuous supervision should be provided to ensure 
internal control objectives are achieved.” Inadequate training and 
supervision of staff with financial recording responsibilities 
increases the foundation’s risk that significant errors will be made. 

The Director of Finance and Administration told us that staff with 
transaction posting responsibilities will attend relevant accounting 
classes. The Director also said that he will begin reviewing the 
postings of transactions to the general ledger. This training and 
supervisory review, if properly implemented, will decrease the risk of 
general ledger misclassifications and errors. 

Lack of Supporting Documents for Adjusting Journal Entries Made by the 
Foundation’s Accounting Firm: 

During our audit, we noted that the foundation lacked supporting 
documentation for eight adjusting journal entries posted by the 
accounting firm that was contracted to perform monthly closing 
procedures and to compile the financial statements for the foundation. 
In discussion with the foundation’s management, we learned that a 
previous policy had required that the foundation’s accounting firm get 
authorization from the foundation before performing any accounting 
services. This policy was established to keep the firm’s billable hours 
to a minimum but led to the lack of on-site supporting documents for 
the adjusting journal entries. Without proper documentation, audit 
results cannot be verified. 

GAO’s Standards for Internal Control in the Federal Government requires 
that “all transactions and other significant events need to be clearly 
documented, and the documentation should be readily available for 
examination.” Without documented support, the foundation increases the 
risk that recorded amounts may not be accurate, properly classified, or 
reliably reported. Since our audit, the Director of Finance and 
Administration has authorized the firm to perform any necessary 
accounting services and to provide the necessary documentation to 
support our audit of the foundation’s financial statements. As part
of our fiscal year 2002 financial statement audit, we will follow up to 
confirm that all supporting documents for adjustments are available at 
the foundation. 

Incomplete Personnel Files: 

In our audit of payroll, we found that 3 of the 13 personnel files were 
missing official foundation documents. For example, the three files did 
not contain letters to the employees offering employment at the 
foundation at a stated salary. Instead, facsimile correspondences 
between the foundation and its payroll service provider were provided 
to us as supporting documents. We were told that foundation staff not
trained as personnel specialists maintained personnel files and that 
the work was not monitored or reviewed. 

We refer again to our Standards for Internal Control in the Federal 
Government, which requires that “qualified and continuous supervision 
should be provided to ensure that internal control objectives are 
achieved” and that “all documentation and records should be properly 
managed and maintained.” Without proper controls over documentation in 
personnel files, the foundation increases the risk that personnel 
decisions will be based on incomplete or inaccurate information. 

The Director of Finance and Administration told us that previously 
there was not a human resources position at the foundation. Because of 
this situation, there was no one to oversee the work of this staff. 
Now, the Director will be responsible for all human resources 
operations at the foundation, including the maintenance of personnel 
files. He has directed that all files of foundation personnel be 
reviewed for completeness to ensure that the information they contain 
is current and correct. 

Lack of Annual Report to the Congress for Fiscal Year 2000: 

Public Law 96-114, as amended, requires that the Congressional Award 
Board prepare and submit an annual report to the Congress before June 1 
of each year summarizing the activities of the Congressional Award 
Program during the previous year. Therefore, the foundation’s fiscal 
year 2000 report was due before June 1, 2001. Among other things, the 
law specifies that the annual report contain the following items: 

* specific information regarding the methods used to raise funds for the
Congressional Award Program and a list of the sources of all money 
raised by the board; 

* detailed information regarding the expenditures made by the board, 
including the percentage of funds that are used for administrative 

* description of the programs formulated by the Director to carry out 
the policies of the Congressional Award Program, including an 
explanation of the operation of such programs and a list of their 

* detailed list of the administrative expenditures made by the board, 
including the amounts expended for salaries, travel expenses, and 
reimbursed expenses; 

* list of individuals given awards under the program and their places of
residence; and; 

* other information as the board may consider significant. 

Submission of the report not only fulfills the statutory requirement, 
but also serves to inform the Congress of the program’s activities and 
assist the Congress in its oversight responsibilities. 

For fiscal year 2000, there is no specific evidence to show that the 
annual report was submitted. In our follow-up, we were told that the 
previous foundation management may have published the report in June 
2001, but no such report could be found. We are aware that the June 
2001 date occurred before the transition to the current foundation 
leadership. Because of the transition in leadership from fiscal year 
2001 to 2002, foundation officials have told us they do not plan to 
retroactively publish a report for fiscal year 2000. However, the 
current foundation management has met the June 2002 date and has 
published the fiscal year 2001 report. 


With the creation of the position of Director of Finance and 
Administration, the Congressional Award Foundation has in place the 
executive leadership to address the internal control weaknesses we 
found in our fiscal year 2001 audit. In response to our findings, the 
current Director has begun taking appropriate actions. If properly 
implemented and applied, we believe that these actions, together with 
successful implementation of our recommendations, will effectively 
address our concerns and strengthen internal controls at the 
foundation. As part of our fiscal year 2002 audit we will follow up on 
these matters to confirm that they have been successfully addressed. 


We recommend that the Director of Finance and Administration take the 
following actions: 

* implement the use of the check request form and require that requests 
for payments are clearly documented on this form; 

* arrange for training in relevant accounting procedures for staff 
responsible for the posting of transactions in the general ledger and 
provide supervision of staff to ensure that transactions are posted 

* adjust policies governing the work of the foundation’s accounting 
firm to provide for the firm to maintain on site all documentation 
necessary to support the foundation’s financial results, and; 

* provide continuing oversight of the maintenance of personnel files to 
ensure that information in personnel files is current and correct. 

Agency Comments: 

The foundations Director of Finance and Administration agreed with our 
findings and recommendations and described actions under way and 
planned to address them. 

This report is intended for use by Congressional Award Foundation 
management and its Board of Directors. This report is a matter of 
public record, and its distribution is not limited. Consequently, 
copies are available to others upon request. In addition, this report 
will be available at no charge on the GAO Web site at [hyperlink,]. 

We acknowledge and appreciate the cooperation and assistance provided by
foundation management and staff members during our audit of the 
foundation’s fiscal year 2001 financial statements. If you have any 
questions regarding this report, please contact me at (202) 512-9406 or 
Julie T. Philips, Assistant Director, at (202) 512-5121. You can also 
reach us by e-mail at or Key 
contributors to this report were Greg Ziombra and Doug Delacruz. 

Sincerely yours, 

Signed by: 

Jeanette Franzel: 
Financial Management and Assurance: 

[End of section] 


[1] U.S. General Accounting Office, Financial Audit: Congressional 
Award Foundation’s Fiscal Years 2001 and 2000 Financial Statements, GAO-
02-672 (Washington D.C.: May 15, 2002). 

[2] U.S. General Accounting Office, Standards for Internal Control in 
the Federal Government, GAO/AIMD-00-21.3.1 (Washington D.C.: November 

[End of section] 

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